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Govt announces 2nd round of FDI reforms; 100% in telecom

Updated On - Monday, 26 August 2013

16 July 2013

NEW DELHI: In big-ticket reforms push, the government today decided to hike foreign direct investment (FDI) in a dozen sectors, including 100 per cent in telecom and higher caps in insurance and defence sectors, to boost the sagging economy. 

However, the high-level meeting chaired by Prime Minister Manmohan Singh did not take a view on raising FDI limits in sectors like civil aviation, airport, media, multi-brand retail and brownfield (existing firms) pharmaceuticals. 

The second wave of reforms comes within 10 months of the government opening floodgates of foreign investment in sectors like multi-brand retail and civil aviation. 

Today's announcement comes as the government cramps in reforms in the limited window it has before the assembly elections in states like Delhi this year and the Lok Sabha polls in 2014. 
While the FDI cap in defence sector remained unchanged at 26 per cent, higher limits of foreign investments in 'state-of-the-art' technology manufacturing will be considered by the Cabinet Committee on Security, Commerce and Industry Minister Anand Sharma told reporters here. 

On what he meant by "state-of-the-art", Sharma said the term would be defined by the Defence Ministry. 
All these decisions were taken by "consensus" during the meeting in which Ministers of Defence, Finance, Petroleum, Food and Consumer Affairs, Power and Home were present, he said, adding it will bolster investment, employment and growth. 

"A Cabinet note will be moved immediately and the next meeting of the Cabinet will take up all these decisions," the Minister said. 

In the contentious insurance sector, it was decided to raise the sectoral FDI cap from 26 per cent to 49 per cent under automatic route under which companies investing do not require prior government approval. A Bill to raise FDI cap in the sector is pending in the Rajya Sabha. 

It was decided to allow 49 per cent FDI in single brand retail under the automatic route and beyond through the Foreign Investment Promotion Board (FIPB) route. 
For multi-brand retail, he said, as promised earlier there will be "greater clarity and comfort" for investors and this will be done "soon". 

Besides civil aviation, Sharma said, no view was taken on relaxing FDI caps in airports, media and brownfield pharma. 

In case of PSU oil refineries, commodity bourses, power exchanges, stock exchanges and clearing corporations, FDI will be allowed up to 49 per cent under automatic route as against current routing of the investment through FIPB. 

The decisions taken were based on recommendations of Mayaram Committee which had suggested relaxing investment caps in about 20 sectors, but the meeting today approved only in 12 segments. 
In basic and cellular services, FDI was raised to 100 per cent from current 74 per cent. Of this, up to 49 per cent will be allowed under automatic route and the remaining through FIPB approval. 

A similar dispensation would be allowed for asset reconstruction companies and tea plantations. 
FDI of up to 100 per cent was allowed in courier services under automatic route. Earlier, similar amount of investment was allowed through FIPB route. 
In credit information firms, 74 per cent FDI under automatic route has been been allowed. 
Replying to a question on "ownership and control" in companies having FDI, Sharma said a Cabinet note regarding this would be moved soon.

Published by: The Economic Times

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